Financial Intermediaries Quiz

What is the primary function of large, diversified brokerage firms in the money market?

• To make a market for money market securities by maintaining an inventory from which to buy or sell

• None of the above

• To buy money market securities from corporations that need liquidity

• To sell money market securities to the Federal Reserve for its open market operations

A bank is solvent as long as it

• has mostly good loans

• is able to meet all demands by depositors for payment

• all of the above

• does not experience a run on its deposits

As opposed to most other debt instruments, mortgage loans tend to

• be repaid over the life of the loan

• be of larger denomination

• None of the above

• pay interest less frequently

In most variable-rate mortgages, the homebuyer

• assumes all of the interest rate risk

• assumes none of the interest rate risk

• shares the interest rate risk with the lender

• does not repay the principal until maturity

The Federal Deposit Insurance Corporation (FDIC) insures each depositor at a commercial bank, savings and loan association, or mutual savings bank up to a loss of ________ per account.

• $250,000

• $100,000

• $500,000

• $1,000,000

• $2,000,000

Asymmetric information can lead to the widespread collapse of financial intermediaries, referred as financial

• panic

• bubble

• asset

• fund

• transaction

Asymmetric information can lead to widespread collapse of financial intermediaries, referred to as a

• financial panic

• bank holiday

• financial disintermediation

• financial intermediation

• financial collapse

All financial intermediary institutions in the intermediation market

• buy primary securities and sell secondary securities

• borrow short and lend long

• none of the above

• borrow in small denominations and lend in large

• buy from brokers and dealers and sell to the public

Which of the following is not a regulator of part of the U.S. financial system?

• All of the above are regulators

• National Credit Union Administration

• Securities and Exchange Commission

• Federal Reserve System

• Federal Deposit Insurance Corporation

What is the object of fixed exchange rates?

• To eliminate the economic fluctuations that result from short-run, self-reversing forces

• To prevent exchange rates from changing

• To prevent misallocation of economic resources

• None of the above

• To prevent the effects of one country's inflationary policies from spreading to other countries